Standard term expenditure and budgetary practices in Ethiopia

Abstract

Abebe Yusuf

Despite its top ranked position in formulating and launching national development plans in the post derg era, budgetary system in Ethiopia is not digitalized and budget is highly an input oriented rather than a performance oriented system. Although substantial policy changes have been undertaken to improve resource allocation in the public sector, more remains to be done to strengthen the process of expenditure planning and budget allocation. In face of limited resource and increasing demands, there is a need to strengthen expenditure planning and budget allocation processes, so as to promote efficiency and sustainability of public investment program. This synthesis paper indicated that there is no unit cost and standardization of activities to estimate operational and project costs. MTEF can improve the efficiency of public expenditure by locking countries into a process which, over time, channels resources from low value to high value uses and helps ensure that key services are adequately funded. Also equally important is the role of MTEF to improve predictability of resource flows if estimates are based on more realistic assumptions about revenue. Moreover, MTEF can raise resource consciousness and promote more output or outcome focused approaches by requiring line departments to be more explicit about what they propose to do, why they want to do it and what it will cost. The framework improves accountability by encouraging governments to consider the medium/long term financial implications of their policy choices. Keywords: MTEF, Budget and Budgetary Practices, Ethiopia, Finance